Corporate governance: the international journal of business in society

High Idiosyncratic Volatility and Low Returns: International and Further U.S. Evidence

This paper examines the volatility of common stocks of the Athens Stock Exchange at the market, industry and firm level. Over the period from 1988 to 2009 there has been a considerable increase in firm-level volatility relative to the market volatility, which implies that it takes increasingly more stocks to diversify away idiosyncratic risk. All volatility series move together and they are trended upwards. All three volatility measures show a countercyclical behaviour relative to GDP growth, and they all help to forecast GDP. Correlations among individual stocks have increased over the sample period, yet the explanatory power of the market model for a typical stock is still relatively low. All three volatility series rise during times of low returns. Factors that may be responsible for these findings are suggested.

Have individual stocks become more volatile : an empirical exploration of idiosyncratic risk

We examine how political connections impact the process of going public. Specifically, we test how political connections impact the pricing of newly offered shares, the magnitude of underpricing, and the fixed cost of going public. Based on experiences of the new public firms in the Chinese security markets and using multiple measures of political connections, we find robust evidence that issuing firms with political connections reap significant preferential benefits from going public. To be specific, we find that firms irrespective of ownership arrangements with greater political connections have higher offering prices, less underpricing, and lower fixed costs during the going-public process.

Political connections and the process of going public: evidence from China

Retail investor attention and stock price crash risk: Evidence from China

Recent evidence in the U.S. and Europe indicates that stocks with high maximum daily returns in the previous month, perform poorly in the current month. We investigate the presence of a similar effect in the emerging Chinese stock markets with portfolio-level analysis and firm-level Fama–MacBeth cross-sectional regressions. We find evidence of a MAX effect similar to the U.S. and European markets. However, contrary to U.S. and European evidence, the MAX effect in China does not weaken much less reverse the anomalous idiosyncratic volatility (IV) effect. Both the MAX and IV effects appear to independently coexist in the Chinese stock markets. Interpreted together with the strong evidence of risk-seeking behaviour among Chinese investors, our results partially support the suggestion that the negative MAX effect is driven by investor preference for stocks with lottery-like features.

Do extreme returns matter in emerging markets? Evidence from the Chinese stock market

Using a manually collected dataset on the overseas experiences of directors of Chinese listed firms, we examine the effects of returnee directors on firms’ corporate social responsibility (CSR) engagement. Our results show that returnee directors significantly improve their firms’ CSR engagement. The positive relationship between the percentage of returnee directors and CSR engagement is more significant when a firm is in a competitive industry, when a firm has no government ownership, when a firm’s CEO is not politically connected, and when a firm’s CEO is older. Furthermore, we find that only long-term foreign professional or academic experience matters, whereas short-term visiting experience does not. Finally, our results are robust after controlling for endogeneity. Therefore, this paper offers clear policy implications by suggesting that hiring more returnees as corporate directors is an efficient way to enhance firms’ CSR, which may be of particular interest to regulators in emerging markets.

Doing Good Business by Hiring Directors with Foreign Experience

CSR and Idiosyncratic Risk: evidence from ESG information disclosure

Does idiosyncratic volatility matter in emerging markets? Evidence from China

We investigate the significance of extreme positive returns (MAX) in the cross-sectional pricing of stocks in South Korea. Our results provide important out-of-sample evidence of a strong negative MAX effect similar to that documented by Bali et al. (2011) in the US stock market. For equal-weighted portfolios, the difference between returns on the portfolios with the highest and lowest maximum daily returns is −1.87% per month. The corresponding difference in alpha is −1.41% per month. The results are robust to controls for size, value, skewness, momentum, short-term reversal and idiosyncratic volatility. We also sort the portfolios by the average of the five highest daily returns within the month and report return and alpha spreads of −2.21% and −2.01% per month, respectively. However, unlike in Bali et al. (2011), the MAX effect cannot reverse the idiosyncratic volatility effect in the South Korean stock market. Our results imply investor preference for high-MAX stocks, consistent with cumulative prospe...

Ji Wu

Papers

Do extreme returns matter in emerging markets? Evidence from the Chinese stock market

Doing Good Business by Hiring Directors with Foreign Experience

CSR and Idiosyncratic Risk: evidence from ESG information disclosure

Does idiosyncratic volatility matter in emerging markets? Evidence from China

Extreme returns in emerging stock markets: evidence of a MAX effect in South Korea